460 B.R. 784
Bankr. D. Kan.2011Background
- Four jointly-considered Chapter 13 cases in the District of Kansas involve debtors proposing pro rata, rather than fixed, monthly payments to secured creditors under 11 U.S.C. §1325(a)(5)(B)(iii).
- Plans deduct trustee fees, debtor attorney fees, and post-petition mortgage arrearages before prorating remaining funds to secured claims.
- Creditors object that pro rata payments do not provide equal monthly amounts as required by §1325(a)(5)(B)(iii).
- Trustee explains pro rata payments can accelerate full repayment of some secured claims and simplify administration, but results in monthly payment fluctuations to creditors.
- Court conducts confirmation hearings; plans in Garver, Neuville, Willis, and Rohr are at issue; Rohr’s claim was fully paid and objection moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether pro rata payments violate §1325(a)(5)(B)(iii). | Willis et al. argue pro rata payments do not meet equal monthly amounts. | Debtors contend equalization can be achieved over time; pro rata aids administration. | No; pro rata payments do not satisfy the equal monthly amounts requirement. |
| Whether attorney fees must be fully paid before secured creditors. | Creditors argue priority demands full prepayment before secured distributions. | Plan could defer attorney fees consistent with §507(a)(2) and §1322(a)(2). | Attorney fees need not be paid in full before secured claims under Chapter 13. |
| What constitutes “equal monthly amounts” in the context of post-confirmation payments. | Creditors rely on strict equal monthly payments from plan start. | Equalization may be achieved over the plan term despite pre-proration deductions. | Plans fail to provide equal monthly amounts because deductions cause fluctuating payments. |
| Are the four plans confirmable given the pro rata structure? | Creditors object to pro rata treatment; expect fixed, predictable payments. | Debtors rely on administrative efficiency and potential quicker repayment to unsecureds. | Confirmation denied for Garver, Neuville, Willis, and Garver; Rohr moot as paid; plans to be amended. |
Key Cases Cited
- In re DeSardi, 340 B.R. 790 (Bankr.S.D. Tex. 2006) (equal monthly payments requirement applies to post-confirmation periodic payments)
- In re Denton, 370 B.R. 441 (Bankr.S.D. Ga. 2007) (equal monthly payments must begin after confirmation)
- In re Lemieux, 347 B.R. 460 (Bankr. D. Mass. 2006) (supporting view on equal monthly payments)
- In re Marks, 394 B.R. 198 (Bankr.N.D. Ill. 2008) (equal monthly payments interpretation in various districts)
- In re Moses, 293 B.R. 711 (Bankr.E.D. Mich. 2003) (early authority on post-confirmation payments)
- In re Bosse, 407 B.R. 444 (Bankr.D. Me. 2009) (discusses treatment of priority and administrative expenses in plans)
- In re Balderas, 328 B.R. 707 (Bankr.W.D. Tex. 2005) (concerning distribution timing with §1326(b)(1))
- In re Bellamy, 379 B.R. 86 (Bankr.D. Md. 2007) (administrative expense distributions alongside plan payments)
- In re Moses, 293 B.R. 711 (Bankr.E.D. Mich. 2003) (regarding equal monthly payments)